Must There Be Salary Increase For Renewal Of Contract ?

Today we shall talk about contract renewal, salary increases and severance pay arising from non-renewal of contract.

Employers usually offer to renew your contract around 1 to 2 months before your current contract ends. Sometimes this is accompanied with a salary increase, the exact same offer or even a decrease in wages and longer working hours. The law does not require an increase in salary, but it does stipulate that there should not be any decrease in salary or harsher requirements regarding working hours.

Talking about an increase in salary, the reason why the law does not require there to be an increase in salary is mainly because that would interfere with the free market in my opinion. Moreover, even if the law did say that there had to be an increase, employers would find a way around it by offering only a 1 yuan increase and get themselves off the hook.

On the other hand, a decrease in salary is certainly not allowed. A decrease includes decrease in allowances like food allowance, housing allowance, flight allowance and bonuses. Offering the same salary for increased working hours or tasks is also prohibited, and you may refuse to accept such an offer, and ask for severance pay.

If you do not get an offer to renew your contract, I would suggest to document your request for a renewal. You should ask at least 3 times to be on the safe side, and whether or not your employer replies does not matter. Make sure you ask on wechat or email, because verbal requests cannot be documented and it will become a you says versus I say scenario. Secret recordings can be used in court as evidence. You should ask for a contract renewal on the exact same circumstances of your old contract.

So if you do not get a renewal, or offered a worse contract, you are entitled to severance pay. Severance pay is 1 month of your salary per year of work at the company which we call N. N is calculated as the average of your past 12 salaries. Your salary includes basic pay, bonuses, overtime pay and all types of allowances. Every half year is rounded up for severance pay, which means if you have worked 2 years and 3 months, you get 3.5N as severance pay, and if you have worked for 3 years and 7 months, you get 4N.